Vermont Employee Retirement Benefits: 2. Health Insurance and Vermont’s Total Retirement Benefit Cost

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Vermont state employees and state hired teachers are also entitled to subsidized health insurance in retirement.

There are two separate programs: the Vermont State Postemployment Benefits Trust Fund and the Retired Teachers Health and Medical Benefit Fund.

The state employee program allows retirees to carry their health insurance into retirement for themselves, their spouses and any dependents. To qualify, they must have a minimum of 20 years of service and retire directly from active employment in the state government.

At age 65, retirees must join Medicare, at which time the state effectively becomes the secondary insurer much like AARP.

For employees who retired before July 1, 2008, they pay only 20% of the health insurance premiums. For those who retired after July 1, 2008, the subsidies are tiered by years of service. If there was 10 or less years of service, the retiree pays 100% and this declines to 20% at 20 years of service. Upon the death of a retiree, any surviving beneficiary must pay 100% of premiums.

In fiscal year 2016, the state government contributed $32.5 million to this plan and retirees paid $9 million. The plan has 4,795 retirees and 13,608 participants (spouses, dependents…).

The teachers’ retiree health insurance plan is available to teachers with at least 10 years of service who retire directly from teaching.Retirees pay 20% of health insurance premiums for themselves and 100% for dependents. Like state employees, retired teachers must enroll in Medicare at age 65.

The program has 6,359 retirees. The state contributed $16.4 million and the retirees $17.9 million in fiscal year 2016.

Cost of Retirement Benefits

The total cost of these programs to the state government in fiscal year 2016 was $178.2 million, as follows:

 

Cost of Retirement Benefits: 2016

 

Program Cost ($ millions)
Vermont State Retirement System 54.3
State Teachers Retirement System 73.2
Vermont State Defined Contribution Plan 1.8
Vermont State Postemployment Benefits Trust Fund 32.5
Retired Teachers Health and Medical Benefit Fund 16.4
Total 178.2

Source: 2016 Comprehensive Annual Financial Report

Remember that current employees are also making substantial contributions to the pension plans ($69.5 million to VSTR and STRS) as well as paying FICA payroll taxes for Social Security and Medicare. As noted above, retirees are making contributions to the health care plans.

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